Is there really opportunity in tea?

I've written an article (http://www.tearetailer.com/article_22.html) assessing the opportunity presented by the US Tea Industry. I'm curious to hear stories of success or failure - be they yours or those you've witnessed.

Charles wrote:I've written an article (http://www.tearetailer.com/article_22.html) assessing the opportunity presented by the US Tea Industry. I'm curious to hear stories of success or failure - be they yours or those you've witnessed.

Great article, Charles. How about also those who have also considered entering into the industry ... and their thought process?

Very good article! And good points that many people may enter the field based on feelings rather than market sense. But I don't blame them. I guess many tea people are "feeling" (rather than "sense") people.

As for opportunity, I believe there is. I picked up the hint when a few years ago for the first time I saw the smaller type of porcelain teapot with metal infuser sold in Walmart (a cheaper version of something similar sold for $40 in Whole Food). When something appears in walmart, it's usually a cheaper version, and it also indicates this has started to get popular

On the other hand, I believe "tea industry" is different from other industry and probably it will never become an "industry". Many successful small tea vendors I've seen never seem to have a goal of growing their business larger. Many of them would rather stay small and enjoy themselves. In China, even relatively large tea vendors never have a significantly big share of the market. I believe such situation will last, probably due to diversity of tea products and inagressiveness of tea culture. In this sense I don't believe more than few tea vendors can make big money from tea business (if we exclude companies like Lipton as tea businesses).

I'd say the fact that retailers are down 10% is not too bad, considering the economy. Even though for some of them that can make or break them. I can think of several other industries that are way worse off.

gingko wrote:I don't believe more than few tea vendors can make big money from tea business (if we exclude companies like Lipton as tea businesses).

I would agree that this is largely true today, but in 1991 there were 1,650 coffee shops in the US and today there are over 25,000. 20 years ago how many people were drinking good wine, or micro-brewed beers, or taking vitamins and supplements? Markets change fast.

The total US tea industry was about $1 billion in 1990 and is somewhere between $7 and $8 billion today. In 2004 there were roughly 1,800 tea shops in the US. Today there are over 3,800.

So Charles, is there any survey of how many cups of tea a regular small tea shop serve per day? Research said that a prime located Starbucks brew up 100 servings per hour usually from 6 to 9 am. Thanks - T

TIM wrote:Is there any survey of how many cups of tea a regular small tea shop serve per day?

Tim, the short answer is no. The long answer is as follows:

1. Averages don't mean much. There are 4,000 tea shops (including retailers, cafes, and tearooms) in the US and my rough guess is that MAYBE 5% of them are in prime retail locations. But even prime retail means different things. Prime retail in NY is $300 a square foot. Prime retail in a mall in Orange County is $150 a foot. Prime retail in a suburb of Chicago is $40 a foot. The expectations for each of these stores is VERY different.

2. The World Tea News tried to conduct a long term survey of tea shop owners and had quite a few volunteer information. Unfortunately, many couldn't calculate their own gross profit and didn't know the difference between margin and markup. They had to scrap the survey because the business owners weren't savvy enough to provide accurate information. The bigger companies that have good data aren't inclined to share them.

3. While I'm sure they exist, I've never been in a tea shop (and I've been in hundreds) that saw a meaningful (read: lines of people) morning rush that didn't ALSO serve coffee. Though this may also be a function of #1.

4. Because of #3, most tea shops are not set up to focus on number of cups served but to maximize overall revenue. Coffee shops are volume businesses. Most tea shops are not. The average order size in any of the tea shops that I have been closely familiar with (whether mine or belonging to a colleague I know well) have average order sizes 3-5 times that of Starbucks thanks to sales of bulk tea and accessories.